The Emergency Response Fund Bill 2019 and Emergency Response Fund (Consequential Amendments) Bill 2019 (the bills) will allow the federal government to provide assistance to communities across Australia affected by natural disasters through the establishment of the Emergency Response Fund (ERF). The government will use uncommitted funds in the Education Investment Fund (EIF) to deliver the ERF.
This chapter explores a number of key elements of the bills which were raised in submissions:
the management and administration of the proposed ERF;
existing gap in available funding for the mitigation of natural disasters; and
the transfer of funds from the EIF to the ERF.
The management and operation of the Emergency Response Fund
In introducing the bills, the Minister for Emergency Management, the Hon. David Littleproud MP, noted that the establishment of the ERF would 'provide an additional source of sustainable funding for emergency response and recovery' in the wake of a natural disaster with 'significant or catastrophic impact on Australia'. The joint submission by the Department of Finance and Emergency Management Australia, as well as the Explanatory Memorandum, provided further information on the management and operation of the ERF.
Once established, the ERF will be credited with $4 billion of uncommitted funds from the EIF. The government will have access to $150 million per year to assist communities affected by natural disaster.
Funding of the ERF will be available:
…following a natural disaster in Australia that has a significant or catastrophic impact, and where the Government determines that existing programs are insufficient to meet the scale of the response required.
The ERF will be accessible only once a formal decision of the government—via the Cabinet or the Prime Minister—has been made. Once a decision has been made to grant ERF funding by the government, this decision, along with the purpose and amount of funding, will be published as a Budget or Mid-Year Economic and Fiscal Outlook measure.
In making a grant of funding from the ERF on behalf of the government, the Minister 'will be informed by advice from the Director General of Emergency Management Australia', who is 'the senior official responsible for coordinating Australia’s responses to crises, including providing both physical and financial support to those impacted by natural disasters':
The Director General will provide advice to the [Minister] on when the [ERF] should be accessed and the design of funding arrangements for emergency response and recovery from natural disasters.
In preparing advice for the [Minister], the Director General will consult with the State or Territory, local governments and communities affected by the disaster or any other expert to determine the needs of the community and identify any additional recovery assistance that would be beneficial.
The ERF funding will be allocated in accordance with the Public Governance, Performance and Accountability Act 2013, via 'a competitive merit based grants program, discretionary grants or a procurement process'. The program guidelines for the administration of the ERF funding will be developed by Emergency Management Australia in accordance with the Commonwealth Grants Rules and Guidelines 2017, and will be made available on the Department of Home Affairs (DHA) website. Where the Minister makes a grant of ERF funding to a state or territory, this will occur through the COAG Reform Fund.
The ERF will be managed independently and at arm's length of the government by the Future Fund Board of Guardians (Future Fund Board), which 'has a proven track record of managing investment portfolios on behalf of the Government and maximising returns over the long term'. As with other government investment funds, the Finance Minister and the Treasurer will issue an investment mandate to the Future Fund Board.
Under the proposed legislation, the Minister may also choose to transfer up to $150 million per annum to the Home Affairs Emergency Response Fund Special Account or the COAG Reform Fund Special Account, 'for the purposes of making grants and arrangements in relation to emergency management and recovery from natural disasters'.
The majority of submitters supported the purpose of the bills to establish a fund to assist communities affected by natural disasters. For example, Suncorp Group Limited expressed its support for the:
Bills' agenda to build more resilient communities after disaster strikes and acknowledge the need for sustainable disaster response funding to help communities recover from the impacts of severe and catastrophic disasters.
Governance and accountability
The Department of Finance and Emergency Management Australia have set out how the government will be accountable for its decisions regarding disbursements from the ERF.
For example, in addition to information provided through annual reporting, Future Fund performance updates, and information made available on the DHA website, each year the following information will be made available:
Grants funded from the Emergency Response Fund will be published online, consistent with the Commonwealth reporting framework for grants.
Procurements will be undertaken in accordance with the Commonwealth Procurement Rules 2019 and the procurement policy framework.
Funding Program agreed by Government will be reported in the Budget or Mid-Year Economic and Fiscal Outlook papers.
Further, the responsible Ministers 'must cause a review into the operation of the Act within 10 years of its commencement':
The review will consider the extent to which financial assistance provided under the [ERF] has complemented other assistance provided by the Commonwealth, States and Territories in relation to natural disasters. The review will also consider whether the $150 million annual funding limit should be increased.
The final review report, along with the terms of reference, will be tabled in each House of Parliament and will be published on the internet as soon as practicable after the tenth anniversary of the commencement of the Act.
Addressing the gap in funding for mitigation of natural disasters
Some submitters to this inquiry expressed concern with the scope of the ERF, and suggested that it should better respond to the gaps in funding identified in the Productivity Commission report.
For example, the Insurance Australia Group (IAG) proffered that not enough was being done to mitigate natural disasters. The IAG expressed its support for the Productivity Commission's recommendation that the federal government increase annual mitigation funding to states and territories to $200 million per year, and urged 'governments at all levels to increase funding for mitigation works to make communities safer and more resilient for the long-term'.
The Insurance Council of Australia, the Australian Red Cross (Red Cross) and the Australian Local Government Association (ALGA) also expressed their support for this recommendation.
While the Red Cross recommended that the ERF funding be directed solely towards disaster risk reduction, the ALGA 'strongly welcomed' the scope of the bills to extend to funding for post-disaster mitigation and grants. The ALGA suggested an amendment to the bills, such that 'funds not debited from the account in any financial year to be redirected to pre-disaster mitigation funding', to accord with the Productivity Commission's recommendation.
The Australian Business Roundtable for Disaster Resilience & Safer Communities (the Roundtable) commended the government on the steps it had taken following the Productivity Commission's report. The Roundtable noted the establishment of the National Resilience Taskforce, as well as the subsequent creation of the National Disaster Risk Reduction Framework (the Framework), as well as the government's 'contribution to other guidance materials around vulnerability'.
The Roundtable expressed its support for disaster recovery efforts and acknowledged that 'funding is essential for communities to recover and rebuild post disaster'. It cited its own research which 'shows the clear economic and social benefits of also funding disaster mitigation and resilience before a disaster strikes':
Allocating funds to help communities both physically and socially mitigate against a disaster aids community recovery, reconstruction and reduces the costs post disaster. A more balanced approach to spending makes economic sense.
The Department of Finance and Emergency Management Australia has informed the committee that the federal government already contributes a considerable amount of funding for natural disaster recovery through schemes such as the DRFA, the Australian Government Disaster Recovery Payment and the Disaster Recovery Allowance. The ERF will complement this funding, as well as the 'strategic work being undertaken to reduce disaster risk' in line with the Framework.
The ERF will provide the federal government with further flexibility in responding to natural disasters, which is not otherwise available under the existing funding arrangements. It will act as a backstop that will only be accessed by the federal government when it 'determines that existing programs are insufficient to meet the scale of the response required'. This will enable the government to respond to natural disasters more effectively and efficiently, ensuring that assistance will be more readily available to vulnerable communities.
While the primary purpose of the ERF 'will be to provide for additional recovery assistance, including additional recovery grants, economic aid and support for affected communities and industry', the ERF 'will also allow for resilience and mitigation initiatives to be delivered'.
The flexibility of the allocation of funding under the ERF will therefore 'ensure the long‑term recovery of an affected area and strengthen it in the face of future hazards'.
The Education Investment Fund
As noted above, the ERF will make use of the excess funding in the now dormant EIF. The EIF was one of three 'Nation-building funds' established by the Nation‑building Funds Act 2008, and replaced the Higher Education Endowment Fund (HEEF). The Department of Education provides the following overview of the EIF:
The EIF aimed to build a modern, productive, internationally competitive Australian economy by supporting world-leading, strategically-focused infrastructure investments that would transform Australian tertiary education and research.
The competitive rounds of EIF offered eligible higher education providers, vocational education and training (VET) providers and research institutions the opportunity to compete for funds for their priority infrastructure projects.
In its submission, Monash University provided background to the establishment of the EIF:
The EIF replaced the Higher Education Endowment Fund (HEEF). HEEF was established in 2007 as a perpetual fund to provide a guaranteed source of funding for capital works and research facilities to ensure Australia’s universities continued to grow as first class teaching and research institutions.
Similarly, the EIF aimed to build a modern, productive, internationally competitive Australian economy by supporting world-leading, strategically-focused infrastructure investments that would transform Australian tertiary education and research. In doing so, the EIF has contributed to Australia’s economic development, talent pipeline and global competitiveness.
Monash University submitted that, '[t]aken together, the HEEF and EIF funds have supplemented individual university contributions to develop world class research facilities infrastructure that supports Australian industry'.
The Australian Catholic University (ACU) submitted that the EIF provided 'Australia’s university sector with its only dedicated pool of funding to support strategically-focused infrastructure investments'. The ACU opined that this investment in the higher education sector 'is essential to transforming Australian higher education and research, and to ensuring the ongoing international competitiveness of Australia’s tertiary education sector'.
The University of Canberra expressed its concern that '[w]ithout a public funding stream for capital, many Australian universities are likely to fall behind the levels of investment needed to stay competitive internationally'.
However, as the Department of Finance and Emergency Management Australia has noted, '[u]nlike its predecessor…the EIF was not designed to be a perpetual fund'.
Indeed, the closure of the EIF, announced in the 2014–15 Budget, was carried out in response to a recommendation by the National Commission of Audit (NCA). The NCA was established by the Coalition Government in October 2013 'as an independent body to review and report on the performance, functions and roles of the Commonwealth government', and reported in March 2014.
In discussing the EIF in its report, the NCA found that '[t]he vast majority of projects funded under the Education Investment Fund…have been of relatively small size', and identified the focus on investing in new projects as a weakness, insofar as '[l]ess emphasis is given to maintaining and improving the condition of existing assets'. The NCA considered that '[t]his can undermine an integrated planning approach to the road network for example, by encouraging a focus on new projects rather than on the network as a whole'.
The NCA also stated that 'there are significant management and governance costs associated with the Nation-building Funds', and suggested that the government could 're-examine the need for the Nation-building Funds in their current form'. In respect of the EIF (and the Health and Hospitals Fund), the NCA started that:
…consideration should be given to the long-term structures for education and health infrastructure funding, consistent with the Commission’s Phase One recommendations in relation to progressive reform to health sector funding, and funding for research infrastructure, vocational education and training.
The Department of Finance and Emergency Management Australia also noted that no new spending commitments from the EIF had been entered into since 2013 and all commitments have been paid.
Concerns with closing the Education Investment Fund
Submitting universities, whilst overwhelmingly supportive of the government's efforts to increase its support to communities affected by a natural disaster, expressed concern that the funding for the ERF will be established at the expense of 'building world-class teaching and research facilities in Australia's universities'.
In its submission, the Group of Eight Australia (Go8) noted that approximately 'half of the $4.207 billion investment from the EIF has funded research infrastructure'. The Go8 submitted that the $66.4 billion per annum contribution by the Go8 to the Australian economy 'would not be possible were it not for key research infrastructure set up or funded by EIF'.
The Go8 suggested that the closing of the EIF has left a gap in funding to the higher education sector that is yet to be addressed:
'[t]he 2015 Report of the Higher Education Infrastructure Working Group (HEIWG)…found that the decision to abolish the EIF, made in the 2014 Budget, left universities with minimal Commonwealth Government capital funding programmes for infrastructure. In terms of non-research infrastructure, this issue has yet to be redressed.
Submitting universities also expressed concern about the broader implications of closing the EIF. For example, Innovative Research Universities warned against the loss of the remaining EIF funds which it considered 'will hinder universities capacity to deliver across regional, rural and remote Australia'. Universities Australia noted that the National Regional, Rural and Remote Tertiary Education Strategy final report (the Napthine Review) 'makes important points about investing in rural, regional and remote education and research':
In 2011-12, the EIF did just this, with a dedicated rural and regional round that invested $312.6 million in regional New South Wales, Victoria, Northern Territory, Tasmania, Queensland and South Australia.
To support their argument against closing the EIF, submitting universities and peak representative bodies provided examples of the benefits received and projects undertaken by member universities as a result of EIF funding.
In its submission, the Go8 provided examples of how investments from the EIF into national research infrastructure facilities have enabled capability to be built to respond to natural disasters:
weather scenario predictions that enable planning for major weather events such as storms, flooding and bushfires, and assist farmers in maximising their yields and managing risks, could not occur (National Computational Infrastructure)
key terrestrial measures including of soil, landscape and ecosystem aspects that assist (among other functions) in agricultural decision making (Terrestrial Ecosystem Research Network)
development of new and improved crops, healthier food, more sustainable agricultural practices and improved maintenance and regeneration of biodiversity in the face of declining arable land and the challenges of climate variation (Australian Plant Phenomics Facility).
While these projects are significant, the Department of Finance and Emergency Management Australia has outlined in its submission that going forward, education infrastructure projects and other education spending will be funded by the government through the Budget process, rather than through the EIF:
During the Budget, the Government announced it is investing $17.7 billion in the university sector in 2019, with this figure projected to grow to more than $20 billion by 2024.
In addition, in the 2018-19 Budget, the Government announced funding of $1.9 billion (to 2028-29) as part of its Research Infrastructure Investment Plan. This funding is being provided through the National Collaborative Research Infrastructure Strategy (NCRIS) to refresh the nationally significant research infrastructure that researchers from universities, Publicly Funded Research Agencies and industry use. This funding is in addition to operational funding of $150 million per annum (indexed, ongoing) for NCRIS projects, which was announced as part of the National Innovation and Science Agenda in December 2015. This funding supports a range of national research infrastructure that is separate to research infrastructure funded at an institutional level and was previously supported and enabled through the EIF.
The Explanatory Memorandum states that the government has continued to consistently deliver world-class education investments without drawing on the EIF funds, including projects such as:
$150 million to support the relocation and redevelopment of the University of Tasmania's Launceston and Burnie campuses; and
$30 million earmarked for the establishment of a new Central Queensland School of Mining and Manufacturing.
The committee welcomes the establishment of the ERF as a complementary measure to the current funding arrangements with respect to natural disasters. The committee also recognises that the government is in a position to establish this fund because of its sound economic management.
The committee acknowledges the concerns raised about the amount of funding for mitigation of natural disasters, but notes that the ERF will also allow for the delivery of resilience and mitigation initiatives. Further, the committee notes other measures that the government has taken to promote natural disaster resilience, such as the establishment of the National Resilience Taskforce.
The committee notes the provision for a review of the EFR bill within 10 years of its operation, as well as other measures for accountability and reporting. This level of governance and accountability will ensure that there is confidence in the management of this fund and its investments.
While the committee acknowledges the concerns expressed by the university sector regarding the closure of the EIF, the committee notes that the government has continued to fund key infrastructure projects despite the fact that the EIF has not been operational for approximately six years. The committee notes the government's ongoing commitment to higher education, and does not agree that the EIF is integral to creating a world-class education system in Australia.
Indeed, it is evident that the government can continue to build a world-class education system in Australia without drawing upon the EIF. It is the committee's view that the uncommitted funds in the now dormant EIF are best spent helping communities to respond to natural disasters with catastrophic or significant impacts.
The committee recommends that the Senate pass the bills.
Senator James Paterson